World Bank report slam India on governance

Indian Express, 16 Sept 2006

While India may score high with the World Bank on growth, the story on governance is very different. A report on Governance Indicators released at the IMF-World Bank annual meeting in Singapore puts India at abysmally low levels. In a database of 213 countries that measures the political, economic and the institutional aspects of governance, the World Bank report ranks India at half or below half on most indicators.

The six facets of governance, each based on a number of underlying indicators itself, are Voice and Accountability, Political Stability, Government Effectiveness, Regulatory Quality, Rule or Law and Control of Corruption. A score is given for each indicator based on a number of sources, and then each country is placed in one of the six groups based on its percentile.

The measures are based on surveys and margins of error are reported. They reflect the perception of a large number of respondents about the conditions prevailing in the country.

However, a look at where India gets placed as a consequences of the responses raises questions about the correctness of the use of such surveys for cross-country comparisons.

Consider this. Voice and Accountability looks at conditions like civil liberties, political rights, freedom of press and institutional. The report puts India in 2005 in the 56th percentile.

India is also in the 56th percentile on the rule of law indicator. This is measured crime, kidnapping of foreigners, enforcability of private contracts, crime, tax evasion, black markets and variables like judicial independence.

India is worse, though better than half of the 213 countries, on government effectiveness. This measures red tape, the bureaucracy and government stability.

Notwithstanding the excellent by international standards regulation in stock markets, telecom and so on, India fares at the 44th percentile on regulatory quality. The indicator measures regulation of exports, imports, ownership of business and equities, price controls, administrative burden and unfair trade.

What takes the cake, however, is the political stability indicator. India is placed in the 22nd percentile. Political stability measures the possiblity of a military coup, major insurgency, civil war, armed conflict, social unrest, country terrorist threat for firms, external conflict and government stability. This suggests that nearly 78 percent of the 213 countries listed, including in Asia and Africa are more politically stable than India! This ranking puts the report's methodology in doubt. The World Bank should perhaps have a second look at making such indicators and ranking before coming to such conclusions.